- Date : 13/08/2021
- Read: 4 mins
Automating your investments can help you achieve your financial goals. Here’s how.
Getting a paycheck at the end of every month is a reassuring feeling. The same happens when a self-employed person or a business owner gets an invoice processed. All of us make plans to spend our income judiciously, but financial discipline is not easy. Unplanned expenses and impulse spends often upset our investment plans.
How can you ensure that your intentions of regular investment savings for any emergency – or retired life – actually happens? Consider putting an Automatic Investment Plan (AIP) in place as your ideal option.
What is Automatic Investment Plan (AIP)?
An Automatic Investment Plan allows you to put money in an investment account at regular intervals through a planned strategy. Every month, a fixed amount will be deducted from your bank account or paycheck. According to financial advisor David Bach, it is a concept of ‘paying yourself first’.
Just like the various expenses and bills that you pay, you are treating yourself as another bill and paying yourself. In the process, you are actually saving for your retirement or financial goals. Since the amount is deducted automatically, there is little chance of missing a payment as long as you maintain the required balance.
Why should you consider automating your investment?
Automating your investment can ensure handsome benefits that you may otherwise miss out on. Let’s look at the advantages.
- Accuracy: With automated investments, you are unlikely to miss out on regular investing. Even if an ECS order fails due to insufficient funds, you are alerted about it and you can arrange funds to make sure that the contribution continues each month. Automation makes investment contribution an obligation, and we almost become programmed to honour it each month.
- Certainty: It is natural that after a month of hardship, when the salary is finally in your hand, you feel you deserve to splurge a little. As a business owner, you may invest the money back into your business, prioritising it over personal investments. But with an AIP, you divert a portion of your fund consistently to secure your financial future.
- Time saved: Once you decide your platform of investment, open your bank account and decide your recurring monthly payment. From then on, you can relax as you don’t have to take time out of your busy schedule to invest. All you need to do is to follow market trends and monitor your portfolio. AIP saves you time.
- Convenience: You need to follow a lot of protocols and go through long documentation processes if you choose a traditional method of investing. But AIP is hassle-free. Mobile banking apps and netbanking are popularly used to automate investments. Once initiated, deposits happen automatically. Investment performance can be checked online or obtained through email as well.
- Cost benefit: AIP is cost-efficient. You don’t have to pay a lot of transaction fees, although there may be regular charges that are applicable across platforms. Traditional investing avenues a lot of hidden expenses, such as coordinating, frequent travelling to branches, agent’s charges etc.
Related: Here's all you need to know about Mutual Fund Automated Rebalancing System
How to automate your investment?
The following steps will help you to automate your investment:
- Consolidate your accounts: It is not advisable to keep too many bank accounts. Try to bring all your funds under one or two accounts. This helps in managing your cash flow properly.
- Put your investment on autopilot: Set up an automatic investment system through which, as soon as you receive your salary, your monthly investment amount is deducted from your account and gets deposited in the investment account.
- Hire a financial advisor: To know more about your investment plan, hire a finance professional who can guide you with the correct information. They can help you design your portfolio in keeping with your automatic investment plan.
- Monitor your investments: Keep an eye on your investment plan always. Keep track of the monthly statements. If there’s any confusion, make inquiries. If your investments are not performing well, consider reshuffling your portfolio and choosing better-performing investments.
List of top 10 products that allow automatic investments:
It is important to select the optimum portfolio and consider your time horizon while automating your investments. If you design your investment portfolio wisely (or get it done with professional help) less intervention will be required on an ongoing basis. Besides, how long you plan to invest will depend on your financial goals and the sustainability of your income flow.
Once these things are taken care of, you can automate your investments. Enjoy peace of mind as your investments continue to accumulate without a miss – in auto-pilot mode!